23.05.14 Friday Morning

The week began with a marginally softer tone to risk appetite for equities, as Europe followed on from a weak tone set by Asian shares following weaker-than-forecast home price data. The big headline of the day was also one that dominated the London-leading index. AstraZeneca shares were sent screaming lower on Monday’s open as news that the board had rejected Pfizer’s new and improved offer was met with heavy selling. The shares were more than 10 percent lower on Friday’s close in under a minute. Heavy volume persisted as headlines from the story dominated traders’ screens. The stock at one point dragged the index lower by almost thirty points.

In company news, Ryanair reported profits for the fiscal year falling by 8 percent. Gable, the insurance firm, reported an almost 100 percent profit before tax increase, an update that helped underpin new highs in the share price.

Little change to risk appetite is how Tuesday began, with FTSE 100 opening very marginally higher. Asian equities made a recovery from Monday’s fears of a continued slowdown facing China. News that Russia was close to making a $400bn gas deal with China hit headlines too, speaking of a growing unity between to the two nations. The FTSE 100, however, soon fell target to selling pressure. Vodafone shares were in focus, as full-year adjusted operating profit fell 9.4 percent. The news sent investors running to the exit, pushing shares down 5 percent to just below 205p. The other story in the equity market was Marks & Spencer, who reported full-year earnings per share of just over 32 pence. The initial reaction was bearish, with participants removing exposure immediately. But this selling was soon reversed to have the shares close only 1 percent lower.

Wednesday brought with it another down day for Asian equities in spite of the Bank of Japan voting unanimously to keep its monetary policy unchanged. The yen, however, did strengthen, helped by a better-than-expected increase in exports. The FTSE 100 once again traded happily around the 6,800 level, opening virtually unchanged against a stable backdrop. Investors began positioning ahead of the FOMC minutes due out later from the US. Meanwhile, China announced a delay to the gas deal between it and Russia, sending a blow to Putin at a critical time.

U.S. equities started the session in fine form, driving higher from the off. The 16,400 level was soon broken, and the index was trading at the 16,500 by mid-afternoon. Choppy trading then ensued as the minutes were released. Nothing new was really broken from the announcement other than that inflation expectations are to stay low for perhaps longer than expected. Naturally, this acted to buoy the day’s rally and the index closed out the day with a strong return.

Finally, Thursday brought with it some good news for China. The Chinese manufacturing gauge increased to a five month high, along with a rise to the MSCI Asia of 1.3 percent from the back of positive sentiment. The news had a similar effect in London to commodity stocks; BHP Billiton and Rio Tinto gapped higher and made good ground on the day. Then, to the broader London equity market, Royal Mail shares were in focus. In spite of reporting preliminary results in line with management’s views, the market took flight at the results and shares were trading 10 percent lower in the afternoon. Brokers were citing headwinds as a result of increased competition and not quite enough growth to underpin demand for the shares. The FTSE 100, in line with most of the week, closed out another uneventful day in terms of price action at around the 6,820 level.

Mothercare (MTC)

Mothercare shocked the market back towards the beginning of the year with a profit warning that sent shares collapsing 30 percent in just one day. From there the sellers continued to dominate. The stock drifted from just under 300p to below 140p in the ensuing months.

But yesterday the market saw what might be a revival to the long-awaited recovery story. Alan Parker, Chairman of Mothercare, announced an “encouraging” set of interim results, citing a recovery in Q4 from the dismal performance in Q3. And although UK sales continued to underperform, growth was seen in other areas, notably Africa and the Middle East.

The important thing to note is just how bearish the market has got over the company. If the company can secure its funding and a new CEO in line with a workable strategy, a short squeeze could ensue. But there a lot of ifs to overcome before that can become a real prospect just yet.

Earnings

Tuesday:
 
AVEVA Group PLC - Preliminary 2013 AVEVA Group PLC Earnings Release

Wednesday:

Scapa Group PLC -Preliminary 2013 Scapa Group PLC Earnings Release
Brewin Dolphin Holdings PLC - Interim 2014 Brewin Dolphin Holdings PLC Earnings Release
Iomart GroupL - Preliminary 2013 Iomart Group PLC Earnings Release
Seadrill Partners - Q1 2014 Seadrill Partners LLC Earnings Release

Thursday:

Future PLC - Interim 2014 Future PLC Earnings Release
PayPoint PLC - Preliminary 2013 PayPoint PLC Earnings Release
Electra Private Equity PLC - Interim 2014 Electra Private Equity PLC Earnings Release

Market Data

Monday:

Bank Holiday

Tuesday:

USD - Core Durable Goods Orders m/m
USD - CB Consumer Confidence
JPY - BOJ Gov Kuroda Speaks

Wednesday:

GBP - Nationwide HPI m/m
EUR - M3 Money Supply y/y

Thursday:

USD - Prelim GDP q/q
USD - Unemployment Claims

USD - Pending Home Sales m/m

Friday:

USD - Core PCE Price Index m/m
USD - Chicago PMI